Assuming That We Can Earn a 13

question 63

Multiple Choice

Assuming that we can earn a 13.5% return on accounts receivable,which of the following actions to finance an increase in our accounts receivable balance would be optimal?

• A) A reduction in marketable securities which are earning a return of 14.2%
• B) A decrease in inventories which are earning a 17.6% return
• C) An increase in bank loans that would cost us 11.5%
• D) An increase in accounts payable that would cost our firm 15%

Learn the function and purpose of a sinking fund.

Calculate the total amount of payments or costs associated with loans and investments over time.

Understand the principles of compound interest and how it applies to loans and investments.

Calculate the total amount paid over the life of a loan including interest.

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Definitions:

Slope

In mathematics, the slope is a measure of the steepness or the inclination of a line, defined as the ratio of the rise over the run between two points on the line.

Intercept

In statistics and mathematics, the point on a graph where a line crosses the y-axis, often used in the context of linear regression.

Errors

Mistakes or inaccuracies that can occur in data entry, calculation, accounting, or any process, leading to discrepancies and potential issues.

Cost Analysis

The process of evaluating the costs involved in producing a product or providing a service, to determine ways to reduce or manage expenditures.